Inventory Management: Forecasting

This is a follow up to our first post - Inventory Management: What do I have and our webinar which you can view here.

So once you know what parts you’re tracking and where they are, what do you do with that information?

​​First you need to understand what you’re using. If we are a factory where we are producing goods we can do that by tracking what inventory we use to build our product on a manufacturing order. We know what inventory is on a manufacturing order by linking a bill of material to a manufacturing order.

If a bill of materials (commonly referred to as a BoM) is the recipe for a particular part, the manufacturing order (or MO) is the particular cake we’re making that day. Your manufacturing orders need to detail which exact ingredients you’re using from inventory. This includes the part number, the location and any serial numbers if applicable. This ensures that you are removing inventory from your system as you complete your builds.

If you aren’t producing goods in a factory, you’re selling goods. This should be detailed on a sales order. This is commonly done via Point of Sale (PoS) solutions that automatically remove the sold goods from your inventory.

In addition to tracking what you actually used, manufacturing and sales orders are essential to begin planning what you need to purchase in the future. You can look at historical orders to determine when you have high and low seasons, maybe you need to stack more Christmas decorations during December, but you can also see what orders you have planned that have yet to be completed.

In manufacturing it is common to know what you have to build weeks, or months, in advance. By tracking that information on a manufacturing order, you can tell your purchasing team in advance what they need to buy by comparing the MO requirements to what is in inventory. What you need to buy = what you need to build - what you have. This level of tracking is called demand planning and is one of the components of material resource planning (MRP).

Tracking your orders can also help your finance team with revenue and cash flow forecasting. By understanding what you will sell (planned orders) and what you need to buy (the materials calculated from your demand planning) you now have a physical basis for your cash flow projections.

Knowing what you have is super important not just for running an efficient business - it’s an important cornerstone for giving your business the ability to forecast what will happen in the future. Want to learn more about how Thruline can help with your inventory forecasting? Reach out for a private consultation! We’re launching our self sign up environment in July where you can try out our offerings. Sign up ​for the waitlist and join our Discord Server where you can meet Thruline users and ask questions about the platform.

‍